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Pensions Bill [Lords] (Programme) (No. 2)

This is a broad group of proposals relating to private pensions. I shall speak in support of Government new clause 2 and Government amendments 15 and 16. As we have a relatively short time to discuss these issues I will also deal with the other amendments in the group, and do not anticipate making a further contribution to the debate. Government new clause 2 deals with charges. Obviously, charges are important, as I am sure the whole House will agree, because money that goes on charges does not turn into pensions. The Government are therefore keen to ensure that charges are at a reasonable level and are transparent. For example, following on from the policies of the previous Government, we have gone ahead with the introduction of the National Employment Savings Trust, which will be a low-cost provider designed to ensure that charges across the market are brought down. There is evidence that new entrants to the market and existing providers are already looking at charges significantly lower than many people have experienced on their pensions in the past. In Committee, concerns were raised about whether the Government should be capping charges. As the right hon. Member for East Ham (Stephen Timms), who is responding for the Opposition, is well aware, the Government do have powers to cap certain pension scheme charges. In considering this issue, we became aware of the anomaly that we do not have that power in relation to people who are no longer active members of pension schemes but who are deferred members, and in particular deferred members of qualifying schemes for auto-enrolment. If we want to cap charges—I will come back to that issue in a second—we do not currently have the power in primary legislation to cap them for deferred members of qualifying schemes for auto-enrolment. The purpose of Government new clause 2 is to give us that power, so that if we want to impose charge caps, we can do so systematically and without unintended omissions. Our thinking on charge caps is that in general, we do not believe there will be a problem with charges. Particularly in the early years of auto-enrolment, it will be the very largest firms that come into the system. They will have the resources and time to shop around, they will be able to strike good deals, and they will have the National Employment Savings Trust available to them. We expect that for big and medium-sized firms, relatively low charges will be the norm. However, concern has been expressed about the fact that it will be not the individual pension policyholder but the employer who will choose the provider. That may be a small firm that has little interest in the scheme and is choosing a provider because it has to, rather than because it has an active interest in pensions. It therefore may not put the time and effort required into shopping around, and it may choose a high-cost provider. The members of the scheme, who may not pay much attention to its fine print, may find themselves with above-average charges. If that were to become a problem, we would want the power to do something about it, particularly in the case of deferred members. Once someone has ceased contributing to the scheme or working for the firm, they have even less connection with the scheme and even more vulnerability.